Electrolux Green Bond Second Opinion - Cicero
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Electrolux
Green Bond Second Opinion
March 11, 2019
SHADES OF GREEN
Based on the project
Electrolux Group is a global company headquartered in Stockholm
specialized in the production of household appliances and appliances for category shadings detailed
professional use. These include appliances such as refrigerators, cookers, hobs, below combined with
ovens, professional kitchens as well as washing machines, dryers, vacuum consideration of
cleaners, air-conditioners, water heaters and heat pumps. Electrolux operates Electrolux’s governance
globally with 80% of 2018 sales in the core markets of Western Europe, North structure, we rate the
America, Australia and Brazil. According to the issuer, as of 2018, Electrolux has Electrolux Green Bond
reduced energy used per manufactured standard product by 44% and absolute CO2 Framework Medium
emissions by 66% compared to 2005. The IEA’s Innovation Tracking Framework Green.
that identifies key long-term innovation gaps lists Electrolux as one of the key
R&D initiatives to improve efficiency within appliances
Overall, Electrolux’s Green Bond Framework from March, 2019 provides a clear
GOVERNANCE
and sound framework for investments into projects that align with the Green Bond Based on a qualitative
Principles (2018). Eligible project categories include energy efficiency, eco- assessment of three key
efficient and/or circular economy adapted products, production technologies governance factors,
and processes, pollution prevention and control and renewable energy. CICERO Shades of Green
finds the governance
Green bond proceeds can be used to finance both new projects as well as refinance procedures in this
existing eligible projects. The issuer informed us that major part of the use of
framework to be Excellent.
proceeds from Electrolux’s first green bond issuance are aimed to be used for
financing of new Eligible Green Assets.
Electrolux has in place a sound management and governance structure, as
well as regular and transparent reporting about green bond project achievements
to investors and the public. Science Based Targets (SBTs) aim for emissions
reductions from operations by 80% (Scope 1 and 2) and reductions from products
by 25% (Scope 3) by 2025 (2015 base year). The overall assessment of the
governance structure to support the implementation of the Green Bond Framework GREEN BOND
gives it a rating of Excellent. We note that Electrolux has a strong background in PRINCIPLES
sustainability improvements and has ambitious targets and strategies in place. Based on this review, this
Efficiency improvements, waste avoidance in manufacturing and for end-user Framework is found in
appliances as well as replacement technologies for Hydrofluorocarbons alignment with the
(HFCs) can be financed. In many cases this leads to substantial environmental principles.
improvements. However, there are still greenhouse gas emissions that can
potentially represent a lock-in of technologies that become obsolete in the long
term, e.g., investments in gas powered furnaces. In specific cases proceeds can be
used to invest in fossil fuel efficiency improvements.
Based on the overall assessment of the project types that will be financed by
the green bonds and governance and transparency considerations,
Electrolux’s Green Bond Framework receives a Medium Green shading.
‘Second Opinion’ on Electrolux’s Green Bond Framework 1
Contents
1 Terms and methodology ___________________________________________________________________ 3
Expressing concerns with ‘Shades of Green’ ............................................................................................................ 3
2 Brief description of Electrolux’s Green Bond Framework and related policies _______________________ 4
Environmental Strategies and Policies: ..................................................................................................................... 4
Use of proceeds: ........................................................................................................................................................ 5
Selection: ................................................................................................................................................................... 5
Management of proceeds: ......................................................................................................................................... 6
Reporting:................................................................................................................................................................... 6
3 Assessment of Electrolux’s Green Bond Framework and policies _________________________________ 7
Overall shading .......................................................................................................................................................... 7
Eligible projects under the Electrolux Green Bond Framework ................................................................................. 7
Background ....................................................................................................................................................... 10
Governance Assessment ......................................................................................................................................... 10
Strengths .................................................................................................................................................................. 10
Governance ...................................................................................................................................................... 10
Project Categories ............................................................................................................................................ 11
Pitfalls....................................................................................................................................................................... 11
Governance ...................................................................................................................................................... 11
Project Categories ............................................................................................................................................ 11
Impacts beyond the project boundary .............................................................................................................. 12
Rebound effects ....................................................................................................................................................... 12
Appendix 1: Referenced Documents List ____________________________________________________________ 13
Appendix 2: About CICERO Shades of Green ________________________________________________________ 14
2
1 Terms and methodology This note provides CICERO Shades of Green’s (CICERO Green) second opinion of the Electrolux’s Green Bond Framework dated March, 2019. This second opinion remains relevant to all green bonds issued under this framework for the duration of three years from publication of this second opinion, as long as the framework remains unchanged. Any amendments or updates to the framework require a revised second opinion. CICERO Green encourages the client to make this second opinion publicly available. If any part of the second opinion is quoted, the full report must be made available. The second opinion is based on a review of the framework and documentation of the issuer’s policies and processes, as well as information gathered during meetings, teleconferences and email correspondence with the issuer. Second opinions are restricted to an evaluation of the mechanisms or framework for selecting eligible projects at a general level. CICERO Green is not responsible for an institution’s implementation of a framework, nor does it guarantee or certify the climate effects of investments in eligible projects. Expressing concerns with ‘Shades of Green’ CICERO Green second opinions are graded dark green, medium green or light green, reflecting a broad, qualitative review of the climate and environmental risks and ambitions of the bonds. The shading methodology aims to provide transparency to investors that seek to understand and act upon potential exposure to climate risks and impacts. Investments in all shades of green projects are necessary in order to successfully implement the ambition of the Paris agreement. The shades are intended to communicate the following: Sound governance and transparency processes facilitate delivery of issuer’s climate and environmental ambitions laid out in the framework. Hence, the governance aspects are carefully considered and reflected in the overall shading of the Green Bond Framework. CICERO Green considers four factors in its review of an issuer’s governance processes: 1) the policies and goals of relevance to the Green Bond Framework; 2) the selection process used to identify and approve eligible projects under the framework, 3) the management of proceeds and 4) the reporting on the projects to investors. Based on these factors, we assign an overall governance grade: Fair, Good or Excellent. ‘Second Opinion’ on Electrolux’s Green Bond Framework 3
2 Brief description of Electrolux’s Green
Bond Framework and related policies
Electrolux Group is a global company headquartered in Stockholm specialized in the production of household
appliances. These include appliances such as refrigerators, cookers, hobs, ovens, professional kitchens as well as
washing machines, dryers, vacuum cleaners, air-conditioners, water heaters and heat pumps. The Group is listed
on the Stockholm Stock Exchange, sells approximately 60 million products annually and has 54 000 employees.
Electrolux operates globally with 80% of 2018 sales in the core markets of Western Europe, North America,
Australia and Brazil.
Environmental Strategies and Policies:
Electrolux has developed a comprehensive set of corporate policies and targets and has a group wide sustainability
framework, which is directly overseen by the Group management. The issuer reports annually on progress via its
Sustainability report. Electrolux’s factories with more than 50 employees are required to be ISO 14001 certified
and should also be certified according to ISO 50001 (energy management). Electrolux endorses the United Nations
Global Compact (UNGC) and is a signatory of the UNGC Water Mandate and reports in accordance with the
United Nations Guiding Principles on Business and Human Rights reporting framework. According to the
framework, Electrolux sees the UN Sustainable Development Goals (SDGs) as important for their sustainability
efforts and focuses on SDG 12 “Responsible Consumption and Production”, SDG 13 “Climate Action” as well as
SDG 2 “Zero Hunger” and SDG 8 “Decent Work and Economic Growth”.
Electrolux also responds to the CDP Climate Change and Water questionnaires. The group has a good
understanding of short-term, medium-term and long-term transitional and physical climate risks and has a strategy
in place to evaluate and manage physical risks, such as floods or extreme weather events, for its plants. Electrolux
also uses qualitative and quantitative climate-related scenario analysis to inform their business strategy.
In 2013 Electrolux set a target to reduce the total CO2 emissions by 50% in 2020 relative to 2005 based on a life
cycle approach. In addition, Electrolux aims for a 50% share of renewable energy for their operations in 2020 and
an improvement in CO2 efficiency across all modes of transport by 15% in 2020 compared to 2015. The issuer
informed us that Electrolux set a 2020-target to improve energy efficiency by 20% compared to 2015 and that an
an internal certification scheme to systematically identify energy-saving opportunities is in place. This scheme has
been a key driver for Electrolux’s 44% reduction of absolute energy used per manufactured standard and absolute
66% CO2 emissions reductions compared to 2005. The issuer has science-based targets in place that are approved
by the Science Based Target Initiative. Electrolux commits to reduce greenhouse gas emissions from operations
by 80% (Scope 1 and 2) and emissions from products by 25% (Scope 3) by 2025 (2015 base year). According to
data reported to CDP, the issuer has a target of reducing water consumption by 5% per year in stressed areas
identified with WWF’s water risk filter and by 1% per year in other areas. The water targets are followed up on a
monthly basis on a plant/sector and global level.
In 2017, Electrolux used approximately 300 000 metric tons of thermoplastics raw materials. The issuer informed
us that they currently aim for using 20 000 metric tons per year of recycled plastics by 2020. Electrolux also has a
“zero landfill” objective for its operations. This demands that the amount of landfilled materials cannot exceed 1%
and the amount that goes to incineration cannot exceed 3%.
4Use of proceeds:
According to the Green Bond Framework, proceeds will be used to finance or refinance assets that fall in the
environmental areas included in Electrolux’s Sustainability Framework – For the Better. The share of financed
and re-financed projects will be published annually. The issuer has informed us that the proceeds from the first
bond will mainly be used to finance new eligible projects. Eligible projects can also include R&D as well as
Manufacturing Engineering. According to the framework, Electrolux defines manufacturing engineering as “to
research and to develop tools, processes, machines and equipment; and to integrate the facilities and systems”.
Investments in R&D includes development of new products, whereas Manufacturing Engineering includes the
development of industrial processes.
Proceeds will be used to fund projects in the five project categories: improving product performance and
efficiency; make better use of resources; eliminate harmful materials; achieve more with less; climate targets.
These project categories were selected based on four out of nine of Electrolux’s promises laid out in its
sustainability framework and mostly target the UN Sustainable Development Goals “Climate Action” and
“Responsible Consumption”. The framework specifies the relation of Electrolux’s project categories to the
categories described in the Green Bond Principles.
Electrolux informed us that they foresee the following categories to dominate regarding allocation of proceeds:
improving product performance and efficiency; eliminate harmful materials and achieve more with less.
Electrolux does not exclude financing or re-financing of processes using fossil fuel-based energy generation. This
is qualified by either of the additional eligibility requirements for assets involving fossil fuel:
the fossil fuel component of the energy required to run the equipment is marginal (30%) of a production unit’s total CO2 emissions; for example,
through lower energy consumption from the production unit.
The issuer informed us that processes using fossil fuel-based energy generation is mainly used for heating and for
enameling furnaces as well as small quantities of gas are used for soldering and as fuel for trucks. Potential
financing could include investments in furnaces for enameling using natural gas, but the issuer foresees an
increasing share of renewable gas in the future. The issuer excludes coal and oil as potential fuels.
Selection:
The selection process is a key governance factor to consider in CICERO Green’s assessment. CICERO Green
typically looks at how climate and environmental considerations are considered when evaluating whether projects
can qualify for green bond funding. The broader the project categories, the more importance CICERO Green places
on the governance process.
The selection process includes a screening and verification of potential eligible assets by business area through
Electrolux’s regular investment request process. Subsequently, a formal evaluation against the eligibility criteria
is conducted by the Green Bond Committee. An established Green Bond Committee, comprised of representatives
from Group Sustainability, Group Treasury, Investor Relations and Group Controlling will approve projects that
meet the requirements. The decisions are made periodically and in consensus. The decisions will be documented.
The issuer informed us that these documents will be available to Electrolux’s auditors who will be verifying the
process for project evaluation and selection.
5Considered projects must align with this framework and must feature a high likelihood that the net, long-term environmental impacts of the asset are positive. Efficiency improvements are quantified via a fixed methodology that provides a standardized approach for calculating eligibility. Electrolux has informed us that screening of resiliency and impacts of extreme weather events, flooding, snow and wind, have been analyzed for specific cases and that Electrolux commenced the process of conducting analyses according to the TCFD recommendations during 2019. Management of proceeds: A dedicated, segregated Green Account will be credited by the issue of the green bonds and managed by the Group Treasury. This ensures monitoring and tracking of the use of proceeds. Funds are periodically deducted from the Green Account equal to disbursements for the financing of eligible assets as long as green bonds are outstanding, and proceeds are available and allocated to a portfolio of eligible assets. Prior to disbursement, proceeds in the Green Account are placed as part of the liquidity reserve and managed accordingly. The issuer informed us that these investments are limited to money market instruments, mostly overnight deposits and do not include potential investments in fossil fuel related technologies. Reporting: Transparency, reporting, and verification of impacts are key to enable investors to follow the implementation of green bond programs. Procedures for reporting and disclosure of green bond investments are also vital to build confidence that green bonds are contributing towards a sustainable and climate-friendly future, both among investors and in society. Electrolux plans to publish an annual Green Bond Impact Report on their web page. The report will be subject to external auditing and the respective opinion will be published on Electrolux’s website as well. The Green Bond Impact Report will include the total amount of Green Bonds that have been issued by Electrolux which are outstanding; a description of the portfolio of approved Eligible Assets that have been financed using the net proceeds of the Green Bonds (including the amount allocated to each Eligible Category); a description of the Eligible Green Assets including allocated amounts and their main environmental benefits; information about the split of Green Bond proceeds between new assets and re-financing; the total amount of unallocated Green Bond proceeds (if any); where possible, quantitative descriptions of the environmental benefits of the Eligible Green Assets. Electrolux informed us that expected benefits will be reported until actual data is available. Electrolux has put forward a list of impact metrics for each of the project categories in the Green Bond Framework to quantify environmental benefits. All projects that include fossil fuel will be described in the Green Bond Impact Report and, according to the issuer, use of fossil fuel will be reported as kWh and metric tons of CO2 and compared with the metrics for the entire production unit.< 6
3 Assessment of Electrolux’s Green Bond
Framework and policies
The framework and procedures for Electrolux green bond investments are assessed and their strengths and
weaknesses are discussed in this section. The strengths of an investment framework with respect to environmental
impact are areas where it clearly supports low-carbon projects; weaknesses are typically areas that are unclear or
too general. Pitfalls are also raised in this section to note areas where issuers should be aware of potential macro-
level impacts of investment projects.
Overall shading
Based on the project category shadings detailed below, and consideration of environmental ambitions and
governance structure reflected in Electrolux’s Green Bond Framework, we rate the framework Medium Green.
Eligible projects under the Electrolux Green Bond Framework
At the basic level, the selection of eligible project categories is the primary mechanism to ensure that projects
deliver environmental benefits. Through selection of project categories with clear environmental benefits, green
bonds aim to provide investors with certainty that their investments deliver environmental returns as well as
financial returns. The Green Bonds Principles (GBP) state that the “overall environmental profile” of a project
should be assessed and that the selection process should be “well defined”.
Category Eligible project types Green Shading and some concerns
Improve product Investments in manufacturing equipment and Medium to Dark Green
performance and tooling which relate to specific products with a
efficiency view to improving energy and/or water Focusing on 15% energy
efficiency. Eligible Green Assets should have efficiency improvement compared
(GBP categories: an energy efficiency (weighted average) that is to own product average can be
“Energy Efficiency” at least 15% better compared to the average of seen as ambitious as Electrolux’s
and “Eco-efficient current products produced for a specific market. products are efficient compared to
and/or circular R&D of products with improved energy or benchmarks across regions.
economy adapted water efficiency. Eligible R&D projects will There is no water efficiency
products, production aim to improve the energy efficiency (weighted threshold – according to
technologies and average) at least 15% compared to the average Electrolux due to varying market
processes”) of current products produced for a specific requirements
market. Products will be fossil free, but be
aware of potential lock-in through
investments in fossil-fuel
manufacturing equipment
7Make better use of Investments in manufacturing equipment Medium to Dark Green
resources related to the development and production of
recycled materials (e.g. plastics). Waste recycling is an essential
(GBP category: R&D of recycled materials (e.g. plastics). activity in a low carbon society
“Pollution Eligible Green Assets should have the objective and part of the long-term solution
Prevention and to develop material compositions based on As any activity, recycling will
Control”) recycled plastics, or re-design and qualification entail some emissions (e.g.,
of products for recycled plastics. through energy use, transport,
etc.) and discharges to the
environment (e.g., plastic
pollutants etc.) and should be
managed
Consider that recycled plastics are
still fossil fuel based and that
continuous plastic use in end-user
products can lead to lock-in of
emissions through plastic
dependency
Sourcing recycled materials can
lead to increased emissions (e.g.,
transport). Electrolux aims at
sourcing locally and conducts
LCAs to mitigate this risk.
Eliminate harmful Investments in processing equipment for using Medium to Dark Green
materials refrigerants or foam blowing agents with
greenhouse warming potential (GWP) of less Substitution with foam blowing
(GBP category: than 15 CO2eq1 agents and refrigerants of less
“Pollution Investments in research and development with a than 15 CO2eq is state of the art
Prevention and view to eliminating refrigerants and foam and cutting edge technology
Control”) blowing agents with a GWP which is higher Investments in HFC substitutes
than 15 CO2eq. substantially reduce climate
impact but still involve other
greenhouse gases. However, these
represent a little share of the
overall life cycle impact of
products.
Applying the EU standard
globally can drive global market
1
According to the limit in the definition of the EU directive 2012/19/EU: https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=celex%3A32012L0019
8Achieve more with Investments in commercial buildings in: (i) in Medium Green
less the case of new buildings energy efficiency that
is at least 30% better than applicable building A 30% reduction is in line with
(GBP category: codes and (ii) for renovated buildings at least the IEA ‘well below 2°C’ target
“Green Buildings” 30% improvement in energy efficiency; Despite Electrolux having market
and “Energy Investments in new or renovated factory or focus on Western Europe,
Efficiency”) warehouse buildings (including Manufacturing Australia, North America and
Engineering in relation thereto) which results in Brazil, investments can be global.
at least a 20% improvement in energy LEED GOLD criteria have to be
efficiency; met by commercial buildings
Investments in equipment (including where no building codes exist
Manufacturing Engineering in relation thereto) Be aware of potential lock-in of
which results in at least a 20% increase in emissions through investments in
energy efficiency; more efficient natural gas
Investments in equipment (including manufacturing (e.g., for
Manufacturing Engineering in relation thereto) enameling furnaces) or heating
which aims to reduce water consumption; equipment
Investments in equipment (including Best practice for investments in
Manufacturing Engineering in relation thereto) commercial office buildings and
relating to waste water treatment; factories should also focus on
Investments in equipment (including broader climate impact
Manufacturing Engineering in relation thereto) requirements (e.g., resilience,
which aims to reduce emissions of harmful transport, buildings materials etc)
substances; Note that all construction projects
Investments in equipment (including can have negative local
Manufacturing Engineering in relation thereto) environmental impacts and that
which aims to reduce manufacturing waste; these should be minimized.
Climate targets Investments in equipment (including Dark Green
Manufacturing Engineering relating thereto)
(GBP category: which relates to the generation of renewable Solar and wind power is key to a
“Renewable energy low-carbon transition
Energy”) Investments in equipment (including Potential concerns regarding
Manufacturing Engineering relating thereto) supply-chain emissions of energy
which relates to replacement or conversion of generation technology
equipment that uses fossil fuels to equipment Consider potential emissions and
which uses renewable energy. climate resilience for biogas and
E.g., geo-thermal energy, wind power, solid or geothermal projects
gas bio-based energy, solar panels (collector) or All construction projects can have
photovoltaic panels adverse local environmental
impacts
Table 1. Eligible project categorie
9Background Global electricity use by household appliances and other small plug loads has been growing by nearly 2% a year since 2010. While major household appliances’ electricity demand is decreasing slightly due to energy efficiency improvements globally, small plug loads’ demand (small AC plug products) cancels out the savings calling for ramped up improvements in energy efficiency.2 According to the IEA, the total energy consumption would have been nearly 20% higher today compared to 2000 without the energy efficiency improvements. The IEA’s Innovation Tracking Framework that identifies key long-term innovation gaps lists Electrolux as one of the key R&D initiatives to improve efficiency within appliances3. According to the IPCC, in addition to energy efficiency measures, emission efficiency and material use efficiency as well as recycling and product service efficiency in combination with demand reduction measures are required for a successful transition.4 Governance Assessment Four aspects are studied when assessing Electrolux’s governance procedures: 1) the policies and goals of relevance to the Green Bond Framework; 2) the selection process used to identify eligible projects under the framework; 3) the management of proceeds; and 4) the reporting on the projects to investors. Based on these aspects, an overall grading is given on governance strength falling into one of three classes: Fair, Good or Excellent. Electrolux has appropriate, relevant and Science Based Targets in place that include Scope 3 emissions. The issuer plans to implement TCFD processes as of 2020, but is currently not conducting any scenario stress testing or general climate resilience screening. Projects are selected in consensus, under involvement of internal environmental experts under broader considerations of project impact and in alignment with the companies’ overall climate targets. Expected and actual environmental impacts will be reported based on the published list of impact metrics and will be verified externally. The overall assessment of Electrolux’s governance structure and processes gives it a rating of Excellent. Strengths Governance Electrolux has a track record of working on continues sustainability improvements for the last decades and has strong sustainability competence. It is a clear strength that Electrolux has ambitious Science Based Targets (SBTs) in place that cover not only Scope 1 and 2 emissions, but also Scope 3, emissions related to the end-user phase of their appliances and the objective of using 100% renewable electricity by 2025. Electrolux endorses the United Nations Global Compact (UNGC), UNGC Water Mandate and reports in accordance with the United Nations Guiding Principles on Business and Human Rights reporting framework. In addition, Electrolux has clear focus areas within the Sustainable Development Goals. 2 https://www.iea.org/tcep/buildings/appliances/ 3 https://www.iea.org/tcep/innovation/ 4 https://www.ipcc.ch/site/assets/uploads/2018/02/ipcc_wg3_ar5_chapter10.pdf 10
Project Categories Electrolux includes R&D activities in three out of five of its project categories as eligible project types. This is a strength as it contributes to the development of new or better approaches for climate resilient and low-carbon solutions. This is in line with Electrolux’s Science Based Targets, which require substantial reductions in emissions and increased recycling. By implementing cutting-edge sustainability solutions, Electrolux contributes to market transitions and innovation. It is a strength that the proceeds of Electrolux’s Green Bond Framework will be used to divert any waste from landfills. Through Electrolux’s focus on recycling processes, Electrolux contributes to the development of the circular economy. Efficient utilization of resources is a vital component of the transition to low-carbon and climate resilient growth. The issuer informed us that Life-Cycle-Analyses (LCA) is conducted to analyze the environmental impact of transporting recycled materials (such as plastics) to point of usage. Weaknesses We find no material weaknesses in Electrolux’s Green Bond Framework. Pitfalls Governance Despite publishing a list of impact metrics and having detailed descriptions of methodologies to measure impacts, Electrolux informed us that they do not intend to make impact assessment methodologies publicly available. However, third-party external reviewers of impacts will be able to assess the impact measurement methodologies for all projects, incl. those with fossil fuel involvement. CICERO Green encourages the issuer to publish the methodology in order to facilitate building a common understanding of impact measurements. Project Categories Electrolux does not exclude financing or refinancing of fossil fuel related infrastructure, such as enameling furnaces. Despite limiting investments by additional eligibility criteria as defined in section 2 these project categories bear the risk of locking in emissions. Electrolux should be aware of such lock-in effects and possibly avoid Green Bond funding of projects where the risks of locking in emissions is particularly high. The risk of locking in emissions is mitigated by measuring the extend of fossil fuel involvement and disclosure in Electrolux’s impact report as well as Electrolux’s environmental competence and approved Science Based Targets. CICERO Green notes that investments in some categories may include construction of facilities and other supporting infrastructure. Construction materials like cement, and equipment for construction are likely to be fossil fuel intensive. CICERO Green encourages Electrolux to utilize electric fleets of vehicles and equipment, and to consider alternatives to emissions intensive construction materials. Electrolux plans to invest in manufacturing equipment and tooling related to specific products with improved energy or water efficiency. As eligible assets are required to have an energy efficiency that is at least 15% better compared to the average of current products produced for a specific market, we note that there are no water efficiency thresholds included. According to Electrolux, a similar common water efficiency threshold is not workable to set due to differences in washing technologies in different markets. However, this can manifest as a clear pitfall. The water efficiency targets for Electrolux’s production plants show commitment towards the issue, but are not directly linked to water efficiency improvements of the products. 11
The issuer plans to finance or refinance new or renovated commercial buildings with at least 30% energy efficiency
improvements. Where building codes are applicable, the building codes determine the 30% improvement which
can lead to varying ambition levels of energy efficiency. The framework requires commercial buildings to meet
LEED GOLD criteria, where no buildings codes exist. Factories and warehouses require at least a 20%
improvement in energy efficiency. The Green Bond Framework would benefit from clearer requirements that best
environmental technology is used in eligible building projects and, e.g., exclude fossil fuel related heating sources.
In a low carbon 2050 perspective the energy performance of buildings is expected to be improved with passive
house technology becoming mainstream and the energy performance of existing buildings greatly improved
through refurbishments. This includes broader environmental considerations and resilience screenings. Electrolux
informed us that due to regionally varying conditions, there are no additional general requirements or screening
for access to public transportation, physical risk resilience or fossil fuel heating technology of buildings. The issuer
pointed out that risk resilience screening will be part of the TCFD implementation and that fossil fuel components
will be reported separately. The ambitious overall company targets and the high level of transparency partly
mitigate the pitfalls in this category.
Electrolux plans to allocate Green Bond proceeds to R&D as well as processing equipment that is intended to
replace harmful HFCs. Substitution with foam blowing agents and refrigerants of less than 15 CO2eq is state of
the art and cutting edge technology. While the replacement of HFCs is urgently needed, a remaining threshold for
refrigerants or foam blowing agents with greenhouse warming potential (GWP) of less than 15 CO2eq can still
have environmental impact as greenhouse gases if the gas is not recycled. The issuer informed us that the foam
blowing or refrigerant gases only play a minor role compared to the overall greenhouse gas emission of the product
and that improvements in efficiency of the gases have a substantial effect on overall product efficiency. The
application of EU standard globally is a possibility to drive global markets into a more climate friendly direction.
With regards to the renewable energy project category, CICERO Green notes that Electrolux can also finance or
refinance geothermal or bio-based energy production. The framework requires any investment proposal in
geothermal and bio-based energy installations to be subject to a due diligence process in order to avoid potential
negative environmental aspects, e.g. local water quality, pollutants from geothermal fluids, emissions of non-
condensable gases. However, geothermal energy can be a significant source of emissions, with some plants
generating higher GHG emissions than fossil fuel equivalents. In order to be considered net environmentally
positive, standards call for new and existing geothermal projects to have direct emissions of less than 100g
CO2/kwh5. Bio-based energy solutions could require feedstock and local sourcing considerations.
Impacts beyond the project boundary
Due to the complexity of how socio-economic activities impact the climate, a specific project is likely to have
interactions with the broader community beyond the project borders. These interactions may or may not be climate-
friendly, and, thus, need to be considered with regards to the net impact of climate-related investments.
Rebound effects
Efficiency improvements may lead to rebound effects. When the cost of an activity is reduced there will be
incentives to do more of the same activity. From the project categories in Table 1, an example is improved energy
efficiency manufacturing equipment, which generally could lead to an overall increase in products sold and Scope
3 emissions. Electrolux is aware of such effects and aims to avoids Green Bond funding of projects where the risk
of rebound effects is particularly high.
5
https://www.climatebonds.net/standard/geothermal
12Appendix 1:
Referenced Documents List
Document Document Name Description
Number
0 Electrolux Green Bond Framework March, 2019 Electrolux’s Green Bond Framework
1 Electrolux Annual Report 2017 and 2018 https://www.electroluxgroup.com/en/annual-
reports-27641/
2 Electrolux Sustainability Report 2017 https://www.electroluxgroup.com/en/category/su
stainability/sustainability-reports/
3 Electrolux Sustainability in Brief 2017 Summary of the Sustainability Report 2017
(https://www.electroluxgroup.com/en/electrolux-
sustainability-report-2017-24501/)
4 Electrolux Science Based Targets – Target Electrolux’s targets submitted to Science Based
Submission Form Targets initiative
5 Calculation methods for Eligible Assets Methods to calculate eligibility of assets for the
project categories “product performance and
efficiency improvements” and “achieve more
with less”
6 CDP Climate Change and Water Reports for the Disclosure of climate change and water related
years 2017 and 2018 information for 2017 and 2018
(https://www.cdp.net/en/responses?utf8=%E2%9
C%93&queries%5Bname%5D=electrolux)
7 UN Global Compact Advanced Level of Documents detailing Electrolux’s additional
Reporting and Guiding Principles Reporting reporting standards
Framework (https://www.electroluxgroup.com/sustainabilityr
eports/2017/en/reporting-framework/the-un-
guiding-principles-reporting-framework/)
13Appendix 2: About CICERO Shades of Green CICERO Shades of Green (CICERO Green) is a subsidiary of the climate research institute CICERO. CICERO is Norway’s foremost institute for interdisciplinary climate research. We deliver new insight that helps solve the climate challenge and strengthen international cooperation. CICERO has garnered attention for its work on the effects of manmade emissions on the climate and has played an active role in the UN’s IPCC since 1995. CICERO staff provide quality control and methodological development for CICERO Green. CICERO Green provides second opinions on institutions’ frameworks and guidance for assessing and selecting eligible projects for green bond investments. CICERO Green is internationally recognized as a leading provider of independent reviews of green bonds, since the market’s inception in 2008. CICERO Green is independent of the entity issuing the bond, its directors, senior management and advisers, and is remunerated in a way that prevents any conflicts of interests arising as a result of the fee structure. CICERO Green operates independently from the financial sector and other stakeholders to preserve the unbiased nature and high quality of second opinions. We work with both international and domestic issuers, drawing on the global expertise of the Expert Network on Second Opinions (ENSO). Led by CICERO Green, ENSO contributes expertise to the second opinions, and is comprised of a network of trusted, independent research institutions and reputable experts on climate change and other environmental issues, including the Basque Center for Climate Change (BC3), the Stockholm Environment Institute, the Institute of Energy, Environment and Economy at Tsinghua University and the International Institute for Sustainable Development (IISD). || 14
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